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BAE Systems secures £20bn contract to build frigates for Australian navy

BAE System beat rival bids from Italy’s Fincantieri and Spain’s Navantia for the contract

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Production of the first ship is expected to start in early 2020

BAE Systems PLC (LON:BA.) has landed A$35bn (£20bn) contract to build frigates for the Australian navy, the UK defence company confirmed on Friday.

The group beat rival bids from Italy’s Fincantieri and Spain’s Navantia for the contract. Under the agreement, BAE will design and build nine Hunter class frigates for the Australian navy, replacing the current Anzac class frigates.

The company said it expects to begin negotiations with Australia’s Department of Defence on the initial design of the vessels by year end. Production of the first ship is expected to start in early 2020 in South Australia.

READ: BAE Systems awarded £2.4bn defence contracts for work on submarine programmes

Prime Minister Theresa May said the deal underlined Britain’s close relationship with Australia and was an example of the kind of trade deals the UK can secure after Brexit.

“The sheer scale and nature of this contract puts the UK at the very forefront of maritime design and engineering and demonstrates what can be achieved by UK industry and government working hand-in-hand,” she said.

“We have always been clear that as we leave the EU we have an opportunity to build on our close relationships with allies like Australia. This deal is a perfect illustration that the government is doing exactly that,” she said.

During the building process of the frigates, which will specialise in anti-submarine warfare, BAE will be put in charge of Australian state-owned shipbuilder ASC Shipbuilding in Adelaide. ASC Shipbuilding will become a subsidiary of BAE.

“This ensures BAE Systems is fully responsible and accountable for the delivery of the frigates and ensures the work will be carried out by Australian workers and create Australian jobs,” said Australian Prime Minister Malcolm Turnbull.

BAE shares were up almost 3% to 648.6p shortly before close of play in London on Friday.

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